Distribution (business)


Distribution (business)

Product distribution (or place) is one of the four elements of the marketing mix. An organization or set of organizations (go-between) involved in the process of making a product or service available for use or consumption by a consumer or business user.

The other three parts of the marketing mix are product, pricing, and promotion.

Contents

The distribution channel

Distribution is also a very important component of Logistics & Supply chain management. Distribution in supply chain management refers to the distribution of a good from one business to another. It can be factory to supplier, supplier to retailer, or retailer to end customer. It is defined as a chain of intermediaries, each passing the product down the chain to the next organization, before it finally reaches the consumer or end-user. This process is known as the 'distribution chain' or the 'channel.' Each of the elements in these chains will have their own specific needs, which the producer must take into account, along with those of the all-important end-user.

Channels

A number of alternative 'channels' of distribution may be available:

  • Distributor,who sells to retailers via direct marketing, or brokers can also be used,
  • Retailer (also called dealer or reseller), who sells to end customers
  • Direct Distribution(Direct Marketing),where an organization sells its products directly to the end customer. For example in case of online purchases(Internet Marketing and E-commerce) there will be the seller and customer. For this the seller and the customer may depend on various shipping providers.
  • Advertisement typically used for the consumption goods

Distribution channels may not be restricted to physical products from producer to consumer in certain sectors, since both direct and indirect channels may be used. Hotels, for example, may sell their services (typically rooms) directly or through travel agents, tour operators, airlines, tourist boards, centralized reservation systems, etc. process of transfer the products or services from Producer to Customer or end user.

There have also been some innovations in the distribution of services. For example, there has been an increase in franchising and in rental services - the latter offering anything from televisions through tools. There has also been some evidence of service integration, with services linking together, particularly in the travel and tourism sectors. For example, links now exist between airlines, hotels and car rental services. In addition, there has been a significant increase in retail outlets for the service sector. Outlets such as estate agencies and building society offices are crowding out traditional grocers from major shopping areas.

Channel decisions

Channel Sales is nothing but a chain for marketing a product through different sources.

  • Channel strategy
  • Gravity & adventure
  • Push and Pull strategy
  • Product (or service)
  • Cost
  • Consumer location

Managerial concerns

The channel decision is very important. In theory at least, there is a form of trade-off: the cost of using intermediaries to achieve wider distribution is supposedly lower. Indeed, most consumer goods manufacturers could never justify the cost of selling direct to their consumers, except by mail order. Many suppliers seem to assume that once their product has been sold into the channel, into the beginning of the distribution chain, their job is finished. Yet that distribution chain is merely assuming a part of the supplier's responsibility; and, if they have any aspirations to be market-oriented, their job should really be extended to managing all the processes involved in that chain, until the product or service arrives with the end-user. This may involve a number of decisions on the part of the supplier:

  • Channel membership
  • Channel motivation
  • Monitoring and managing channels

Type of marketing channel

  1. Intensive distribution - Where the majority of resellers stock the 'product' with convenience products, for example, and particularly the brand leaders in consumer goods markets (price competition may be evident).
  2. Selective distribution - This is the normal pattern (in both consumer and industrial markets) where 'suitable' resellers stock the product.In this case retailers can keep the competitors products in their outlets e.g. furniture etc.
  3. Exclusive distribution - Only lam-bard specially selected resellers or authorized dealers (typically only one per geographical area) are allowed to sell the 'product'.

In this retailers are restricted to keep only one manufacturers products e.g. exclusive outlets of cars,apparels and jewellery etc. Marketing plans

Channel motivation

It is difficult enough to motivate direct employees to provide the necessary sales and service support. Motivating the owners and employees of the independent organizations in a distribution chain requires even greater effort. There are many devices for achieving such motivation. Perhaps the most usual is `incentive': the supplier offers a better margin, to tempt the owners in the channel to push the product rather than its competitors; or a compensation is offered to the distributors' sales personnel, so that they are tempted to push the product. Julian Dent defines this incentive as a Channel Value Proposition or business case, with which the supplier sells the channel member on the commercial merits of doing business together. He describes this as selling business models not products.

Monitoring and managing channels

In much the same way that the organization's own sales and distribution activities need to be monitored and managed, so will those of the distribution chain.

In practice, many organizations use a mix of different channels; in particular, they may complement a direct sales-force, calling on the larger accounts, with agents, covering the smaller customers and prospects. These channels show marketing strategies of an organization. Effective management of distribution channel requires making and implementing decision in these areas.

See also

Ref and ext. links


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